BoC: Universally expected to keep the overnight target rate unchanged at 0.50% - RBC CM

The BoC is universally expected to keep the overnight target rate unchanged at 0.50% in the statement-only meeting on Wednesday in view of the analysts at RBC Capital Markets.

Key Quotes

“We expect the central bank to retain its cautious tone and reiterate that there remains material excess slack in the economy. Growth has evolved about as expected by the BoC in the January MPR (BoC has 1.5% for Q4; see preview below) and terms of trade have improved, but significant uncertainties remain, especially regarding possible US protectionist trade policies, and non-energy goods exports continue to disappoint (-4.1% y/y in December).”

“Additionally, previous emphasis on policy divergence from the US as the latter is in a “gradual” hiking cycle is likely to remain a theme. Any discussion on the expected bump up in the YoY headline inflation rate in January will likely focus on rising YoY increases in energy prices and that it is not a sign of diminishing economic slack.”